Comtech Telecommunications Corp. Announces Results for Fiscal 2018 Fourth Quarter and Full Year and Provides Fiscal 2019 Guidance
2018 Fourth Quarter Highlights
-
Net sales for the fourth quarter of fiscal 2018 were
$167.4 million as compared to the$147.8 million achieved during the fourth quarter of fiscal 2017. -
Bookings during the fourth quarter of fiscal 2018 were
$214.4 million , with a company-wide book-to-bill ratio (a measure defined as bookings divided by net sales) of 1.28. Comtech received a number of strategic contracts and orders, including: (i)$44.8 million of orders to supply theU.S. Army with advanced VSAT equipment; (ii) a$31.0 million order to supply its Modular Transportable Transmission System troposcatter terminals to a foreign subsidiary of a U.S. based top-tier prime contractor; (iii) an award of over$20.0 million from a systems integrator for its new high-frequency amplifier products to support high-speed satellite networks; (iv)$16.6 million of orders to provide ongoing sustainment services for theU.S. Army's "SNAP" mobile satellite communications program; and (v) multi-year contract renewals worth$14.2 million for various SMS text messaging solutions.-
GAAP operating income was
$16.0 million and GAAP net income was$7.5 million , or$0.31 per diluted share. GAAP net income was negatively impacted by a net discrete tax expense of$2.3 million , or$0.09 per diluted share ("Tax Expense"), primarily due to updated estimates of the impact of H.R.1, also known as the Tax Cuts and Jobs Act ("Tax Reform"). Excluding the$2.3 million of Tax Expense, GAAP net income would have been$9.7 million , or$0.40 per diluted share. -
Adjusted EBITDA was
$30.7 million . Adjusted EBITDA is a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure and is more fully defined in the below table. -
During the fourth quarter of fiscal 2018, the Company generated cash
flows from operating activities of
$19.7 million and reduced the level of its total indebtedness by$15.0 million . Total indebtedness as ofJuly 31, 2018 was$171.3 million (excluding deferred financing fees) and its current cash borrowing rate is approximately 4.5%. -
As of
July 31, 2018 , the Company had$43.5 million of cash and cash equivalents.
2018 Fiscal Year Highlights
-
Fiscal 2018 was the third consecutive year of revenue growth. Net
sales for the fiscal year ended
July 31, 2018 were$570.6 million as compared to the$550.4 million achieved during fiscal 2017. -
Backlog as of
July 31, 2018 reflects a record high of$630.7 million . Backlog does not include the portions of multi-year contracts that have not been funded. As such, the total value of multi-year contracts thatComtech has received is substantially higher. Bookings during fiscal 2018 were$755.1 million , with a company-wide book-to-bill ratio of 1.32. -
GAAP operating income was
$35.1 million and GAAP net income was$29.8 million , or$1.24 per diluted share. GAAP net income includes a full year net discrete tax benefit of$11.8 million , or$0.49 per diluted share ("Tax Gain"), primarily due to Tax Reform. Excluding the Tax Gain, GAAP net income would have been$18.0 million or$0.75 per diluted share. -
Adjusted EBITDA was
$78.4 million for the fiscal year endedJuly 31, 2018 as compared to the$70.7 million achieved during fiscal 2017. -
During the fiscal year ended
July 31, 2018 , the Company generated cash flows from operating activities of$50.3 million and reduced the level of its total indebtedness by$29.2 million .
In commenting on the Company's performance,
2019 Fiscal Year Financial Targets
Looking forward, the Company believes that fiscal 2019 will be even better and have established the following consolidated financial targets:
-
Net sales goal with a range of approximately
$600.0 million to $625.0 million . - Consolidated fiscal 2019 book-to-bill ratio expected to be in excess of 1.0.
-
GAAP operating income, as a percentage of net sales, expected to be
higher than the 5.9% that
Comtech achieved in fiscal 2018 when excluding the$1.7 million of favorable adjustments described in the Company's annual report on Form 10-K. - The Company's effective income tax rate (excluding discrete tax items in fiscal 2019) is expected to approximate 23.25% and reflects the full year benefit of the reduced U.S. statutory income tax rate resulting from Tax Reform.
-
GAAP diluted EPS goal with a range of approximately
$0.89 to $1.10 . -
Adjusted EBITDA goal in a range of approximately
$80.0 million to$86.0 million .
Comparable to
In addition, based on the anticipated timing of shipments and performance related to orders currently in the Company's backlog and the timing of expected new orders, net sales and Adjusted EBITDA for each of its first three quarters of fiscal 2019 are expected to be a bit better when compared to the respective quarters of fiscal 2018. The Company's fourth quarter of fiscal 2019 is expected to be the peak quarter, by far, for consolidated net sales, operating income and Adjusted EBITDA.
The Company's revenue goal reflects the adoption of the
Additional information about the Company’s fiscal 2019 guidance is included in the Company’s fourth quarter investor presentation which is located on the Company’s website at www.comtechtel.com.
Conference Call
The Company has scheduled an investor conference call for
About
Cautionary Statement Regarding Forward-Looking Statements
Certain information in this press release contains forward-looking
statements, including but not limited to, information relating to the
Company's future performance and financial condition, plans and
objectives of the Company's management and the Company's assumptions
regarding such future performance, financial condition, and plans and
objectives that involve certain significant known and unknown risks and
uncertainties and other factors not under the Company's control which
may cause its actual results, future performance and financial
condition, and achievement of plans and objectives of the Company's
management to be materially different from the results, performance or
other expectations implied by these forward-looking statements. These
factors include, among other things: the risk that the Company will be
unsuccessful in implementing a tactical shift in its Government
Solutions segment away from bidding on large commodity service contracts
and toward pursuing contracts for its niche products with higher
margins; the nature and timing of receipt of, and the Company's
performance on, new or existing orders that can cause significant
fluctuations in net sales and operating results; the timing and funding
of government contracts; adjustments to gross profits on long-term
contracts; risks associated with international sales; rapid
technological change; evolving industry standards; new product
announcements and enhancements, including the risks associated with the
Company's recent launch of HeightsTM Dynamic Network Access
Technology ("HEIGHTS" or "HDNA"); changing customer demands and or
procurement strategies; changes in prevailing economic and political
conditions; changes in the price of oil in global markets; changes in
foreign currency exchange rates; risks associated with the Company's and
COMTECH TELECOMMUNICATIONS CORP. | |||||||||||||||
AND SUBSIDIARIES | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(Unaudited) | (Audited) | ||||||||||||||
Three months ended July 31, | Twelve months ended July 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 167,435,000 | $ | 147,762,000 | $ | 570,589,000 | $ | 550,368,000 | |||||||
Cost of sales | 104,447,000 | 87,350,000 | 346,648,000 | 332,183,000 | |||||||||||
Gross profit | 62,988,000 | 60,412,000 | 223,941,000 | 218,185,000 | |||||||||||
Expenses: | |||||||||||||||
Selling, general and administrative | 27,822,000 | 26,484,000 | 113,922,000 | 116,080,000 | |||||||||||
Research and development | 13,906,000 | 13,889,000 | 53,869,000 | 54,260,000 | |||||||||||
Amortization of intangibles | 5,269,000 | 5,268,000 | 21,075,000 | 22,823,000 | |||||||||||
Settlement of intellectual property |
— | — | — |
(12,020,000) |
|||||||||||
46,997,000 | 45,641,000 | 188,866,000 | 181,143,000 | ||||||||||||
Operating income | 15,991,000 | 14,771,000 | 35,075,000 | 37,042,000 | |||||||||||
Other expenses (income): | |||||||||||||||
Interest expense and other | 2,588,000 | 2,691,000 | 10,195,000 | 11,629,000 | |||||||||||
Interest (income) and other | 65,000 | (80,000 | ) | 254,000 |
(68,000) |
||||||||||
Income before provision for (benefit |
13,338,000 | 12,160,000 | 24,626,000 | 25,481,000 | |||||||||||
Provision for (benefit from) income taxes | 5,880,000 | 4,846,000 | (5,143,000 | ) | 9,654,000 | ||||||||||
Net income | $ | 7,458,000 | $ | 7,314,000 | $ | 29,769,000 | $ | 15,827,000 | |||||||
Net income per share: | |||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 1.25 | $ | 0.68 | |||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 1.24 | $ | 0.67 | |||||||
Weighted average number of common |
23,857,000 | 23,470,000 | 23,825,000 | 23,433,000 | |||||||||||
Weighted average number of common |
24,270,000 | 23,566,000 | 24,040,000 | 23,489,000 | |||||||||||
Dividends declared per issued and |
$ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.60 | |||||||
COMTECH TELECOMMUNICATIONS CORP. | |||||||
AND SUBSIDIARIES | |||||||
Consolidated Balance Sheets | |||||||
(Audited) | |||||||
July 31, 2018 | July 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 43,484,000 | $ | 41,844,000 | |||
Accounts receivable, net | 147,439,000 | 124,962,000 | |||||
Inventories, net | 75,076,000 | 60,603,000 | |||||
Prepaid expenses and other current assets | 13,794,000 | 13,635,000 | |||||
Total current assets | 279,793,000 | 241,044,000 | |||||
Property, plant and equipment, net | 28,987,000 | 32,847,000 | |||||
Goodwill | 290,633,000 | 290,633,000 | |||||
Intangibles with finite lives, net | 240,796,000 | 261,871,000 | |||||
Deferred financing costs, net | 2,205,000 | 3,065,000 | |||||
Other assets, net | 2,743,000 | 2,603,000 | |||||
Total assets | $ | 845,157,000 | $ | 832,063,000 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 43,928,000 | $ | 29,402,000 | |||
Accrued expenses and other current liabilities | 65,034,000 | 68,610,000 | |||||
Dividends payable | 2,356,000 | 2,343,000 | |||||
Customer advances and deposits, current | 34,452,000 | 25,771,000 | |||||
Current portion of long-term debt | 17,211,000 | 15,494,000 | |||||
Current portion of capital lease and other obligations | 1,836,000 | 2,309,000 | |||||
Interest payable | 499,000 | 282,000 | |||||
Total current liabilities | 165,316,000 | 144,211,000 | |||||
Non-current portion of long-term debt, net | 148,087,000 | 176,228,000 | |||||
Non-current portion of capital lease and other obligations | 765,000 | 1,771,000 | |||||
Income taxes payable | 2,572,000 | 2,515,000 | |||||
Deferred tax liability, net | 10,927,000 | 17,306,000 | |||||
Customer advances and deposits, non-current | 7,689,000 | 7,227,000 | |||||
Other liabilities | 4,117,000 | 2,655,000 | |||||
Total liabilities | 339,473,000 | 351,913,000 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $.10 per share; shares authorized and
unissued |
— | — | |||||
Common stock, par value $.10 per share; authorized 100,000,000
shares; |
3,886,000 | 3,862,000 | |||||
Additional paid-in capital | 538,453,000 | 533,001,000 | |||||
Retained earnings | 405,194,000 | 385,136,000 | |||||
947,533,000 | 921,999,000 | ||||||
Less: | |||||||
Treasury stock, at cost (15,033,317 shares at July 31, 2018 and 2017) | (441,849,000 | ) |
(441,849,000) |
||||
Total stockholders’ equity | 505,684,000 | 480,150,000 | |||||
Total liabilities and stockholders’ equity | $ | 845,157,000 | $ | 832,063,000 | |||
AND SUBSIDIARIES
Reconciliation
of Non-GAAP Financial Measures to GAAP Financial Measures
(Unaudited)
Use of Non-GAAP Financial Measures
In order to provide investors with additional information regarding its
financial results, this press release contains "Non-GAAP financial
measures" under the rules of the
Three months ended July 31, | Twelve months ended July 31, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Reconciliation of GAAP Net Income to |
||||||||||||
Net income | $ | 7,458,000 | 7,314,000 | 29,769,000 | 15,827,000 | |||||||
Provision for (benefit from) income taxes | 5,880,000 | 4,846,000 | (5,143,000 | ) | 9,654,000 | |||||||
Interest (income) and other | 65,000 | (80,000 | ) | 254,000 |
(68,000) |
|||||||
Interest expense | 2,588,000 | 2,691,000 | 10,195,000 | 11,629,000 | ||||||||
Amortization of stock-based compensation | 5,638,000 | 5,526,000 | 8,569,000 | 8,506,000 | ||||||||
Amortization of intangibles | 5,269,000 | 5,268,000 | 21,075,000 | 22,823,000 | ||||||||
Depreciation | 3,822,000 | 3,505,000 | 13,655,000 | 14,354,000 | ||||||||
Settlement of intellectual property litigation | — | — | — |
|
(12,020,000) |
|||||||
Adjusted EBITDA | $ | 30,720,000 | 29,070,000 | 78,374,000 | 70,705,000 | |||||||
ECMTL
View source version on businesswire.com: https://www.businesswire.com/news/home/20180926006033/en/
Source:
Media:
Michael D. Porcelain, Senior Vice President and Chief
Financial Officer
631-962-7103
Info@comtechtel.com